Germany Consumer Confidence

Germany: Consumer confidence rises to five-month high

July 26, 2012

Consumers are increasingly worried that the Eurozone crisis would engulf the German economy. However, households' income expectations continue to resist rising threats from outside. The forward-looking GfK consumer confidence indicator for August rose to 5.9 points, up from the 5.8 points recorded in July. The reading represents the highest level since March and overshot market expectations that had consumer sentiment remaining unchanged. While the GfK's overall consumer climate indicator refers to August, its sub-indices refer to July. Despite a slight drop in the sub-indicator of income expectations compared to the previous month, income prospects have remained at healthy levels. Rising employment, improvement in wages and low inflation provide a significant boost to consumers' purchasing power. Willingness to buy improved slightly over the previous month, benefiting from high income expectations and a stable labour market. In contrast, economic expectations deteriorated in July, reflecting rising difficulties experienced by Spain and Italy, which are key German exports destinations within the Eurozone.